Q3 2022 Okta Inc Earnings Call
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Speaker 1: Don't know much biology Don't know much about a Saturday book Don't know much about the French I took But I do know that I love you And I know that if you loved me too What a wonderful world this would be Don't know much about geography Don't know much trigonometry Don't know much about algebra Don't know how to slide through this board But I do know one and one is two And if this was to be with you What a wonderful world this would be Now, I don't claim to be an A student But I'm trying to be For maybe by being an A student, baby I can win your love for me Don't know much about history Don't know much biology Don't know much about a science book Don't know much about the French I took But I do know that I love you And I know that if you loved me too What a wonderful world this would be La-ta-ta-ta-ta-ta-ta-ta History Biology La-ta-ta-ta-ta-ta-ta-ta-ta Science book French I took But I do know that I love you And I know that if you loved me too What a wonderful world this would be It meant for someone else but not for me Our love was out to get me And that's the way it seemed Disappointment haunted all my dreams Then I saw her face Now I'm a believer Saw her trace A doubt in my mind
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[music] Joe Bob.
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Speaker 2: Two and a half years ago, we took a step back and said, what if we started.
Two and a half years ago, we took a step back and said what if we started from scratch. If we knew everything we knew after doing this for 11 years, but re implemented in a way that would take advantage of all the modern advances in technology and that's what I did any engineers.
Speaker 2: We knew everything we knew after doing this for 11 years, but re-implemented it in a way that would take advantage of all the modern advances in technology. And that's what I did.
Speaker 3: It actually really is the engine that powers Okta itself because it's powering that ultimate customer experience that you want or employee experience. It's really where Okta is today as well as where it's going in the future. It is our single sign-on product reimagined. Everything else we built runs off of it. The Okta Identity Engine really helps our customers construct any kind of experience they want for sign-in. And just having more and more of that flexibility and extensibility I think is just going to put more and more power in the hands of customers to really address challenges the way they need to and not the way we think they should. And I think that's something that customers are really excited about.
So it really is the engine that powers up itself, because it's powering at ultimate customer experience that you want or employee experience, it's really where it is today as far as where its going in the future. It is our single sign on product re imagined everything else, we belt runs off the okta identity.
<unk> really helps our customers construct a new kind of experience that one for Simon.
And just having more and more of that flexibility extensibility I think it's just going to put more and more power in the hands of customers to really address challenges the way they need you and not the way we think they should but I think that's something that customers are really excited about.
Speaker 4: Hi, everybody. Welcome to OCTA's third quarter of fiscal year 2022.
Hi, everybody welcome to <unk> third quarter of fiscal year 2022 earnings webcast.
Speaker 4: I'm Dave Gennarelli, Vice President of Investor Relations at Okta. With me in today's meeting, we have Todd McKinnon, our Chief Executive Officer and Co-Founder, Brett Tai, our Interim Chief Financial Officer, and Frederick Harris, our Executive Vice Chairman, Chief Operating Officer and Co-Founder.
We've generally vice President of Investor Relations at Okta with me in today's meeting we have Todd Mckinnon, Our Chief Executive Officer, and co founder Brett tie, our interim Chief Financial Officer, and Frederic <unk>, Our executive Vice Chairman, Chief operating Officer and co founder.
Speaker 4: Today's meeting will include forward looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding our financial outlook and market position.
Today's meeting will include forward looking statements pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1095, including but not limited to statements regarding our financial outlook and market positioning.
Speaker 4: Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statement.
Forward looking statements involve known and unknown risks and uncertainties that may cause our actual results performance or achievements to be materially different from those expressed or implied by the forward looking statements forward looking statements represents management's beliefs and assumptions only as of the date made ink.
Speaker 4: Forward-looking statements represents management's beliefs and assumptions only as of the date made. Information on factors that could affect the company's financial results is included in our filings with the SEC from time to time, including the section titled Risk Factors and our previously filed Form 10-Q .
Information on factors that could affect the company's financial results is included in our filings with the SEC from time to time, including the section titled Risk factors in our previously filed Form 10-Q.
Speaker 4: In addition, during today's meeting, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP.
In addition, during today's meeting we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not as substitute for or superior to measures of financial performance prepared in accordance with GAAP.
Speaker 4: The reconciliation between gap and non- GAAP financial measures and a discussion of the limitations of using non- GAAP measures versus their closest gap equivalents is available on our earnings release. You can also find more detailed information in our supplemental financial materials, which include trended financial statements and key metrics posted on our investor relations website.
A reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents is available on our earnings release, you can also find more detailed information in our supplemental financial materials, which include trended financial statements and key metrics posted on our Investor Relations website.
Speaker 4: In today's meeting, we will quote a number of numeric or growth changes as we discuss our financial performance, and unless otherwise noted, each such reference represents a year-over-year comparison. And now, I'd like to turn the meeting over to Todd.
And today's meeting we will quote a number of numeric or growth changes as we discuss our financial performance and unless otherwise noted each such reference represents a year over year comparison.
And now I'd like to turn the meeting over to Todd Mckinnon Todd.
Speaker 2: Thanks, Dave, and thank you, everyone, for joining us this afternoon. Our strong third quarter results were driven by continued performance across Okta's standalone business, as well as from OffZero. The importance of identity continues to accelerate as global economies endeavor to recover. Okta and OffZero are playing a pivotal role in helping organizations secure access to technology from anywhere.
Thanks, Dave and thank you everyone for joining us. This afternoon, our strong third quarter results were driven by continued performance across <unk> standalone business as well as from a zero the importance of identity continues to accelerate as global economies endeavor to recover after not zero are playing a pivotal role in helping organizations secure access.
The technology from anywhere.
Speaker 2: The three megatrends that have driven Okta's business over the past few years continue to drive our growth. The deployment of cloud and hybrid IT, digital transformation projects, and the adoption of zero-trust security environments.
Three mega trends that have driven at this business over the past few years continue to drive our growth the deployment of cloud and hybrid it digital.
Formation projects and the adoption of Zero Trust security environments I'll start with a quick recap of our combined Q3 financial results and then get into some of our other notable highlights from the quarter in Q3 <unk> grew 49% current ARPA grew 57% total revenue grew 61%.
Speaker 2: I'll start with a quick recap of our combined Q3 financial results, and then get into some of our other notable highlights from the quarter. In Q3, RPO grew 49%.
Speaker 2: Current RPO grew 57%, total revenue grew 61%, subscription revenue grew 63%, and we generated $33 million in free cash flow for a 10% free cash flow margin. We added 950 customers in Q3, with over 700 additions to the Okta platform and over 200 new Auth0 customers.
Subscription revenue grew 63% and we generated $33 million in free cash flow for a 10% free cash flow margin. We added 950 customers in Q3 with over 700 additions to the okta platform and over 200, new zero customers. Our overall customer base now stands at <unk>.
Speaker 2: Our overall customer base now stands at 14,000.
The 14th week.
Speaker 2: We added over 200 customers with $100,000 plus annual contract value, or ACV, and about half of them were new customers.
We added over 200 customers with $100000 plus annual contract value of our ACB and about half of them were new customers. Our total base of $100000 plus ACB customers now stands at over 2800. We also continue to have strong momentum with even larger contracts the growth rate.
Speaker 2: Our total base of $100,000 plus ACV customers now stands at over 2,800. We also continue to have strong momentum with even larger contracts.
Speaker 2: The growth rate for a customer cohort with an ACV of $250,000 or greater all grew 50% or higher. Here are just a few notable examples of large enterprise wins in Q3, which come from a wide range of industries.
For customer cohort with an ACB F $250000 or greater all grew 50% or higher here are just a few notable examples of large enterprise wins in Q3, which come from a wide range of industries.
Speaker 2: A global investment management firm with hundreds of billions of dollars under management was an exciting new workforce and customer identity win this quarter.
Our global investment management firm with hundreds of billions of dollars under management was an exciting new workforce and customer identity win this quarter. The okta identity engine was key to the firm's selecting okta to improve its security posture by modernizing its ecosystem and reducing its dependency on legacy.
Speaker 2: The Okta Identity Engine was key to the firm selecting Okta to improve its security posture by modernizing its IT ecosystem and reducing its dependency on legacy on-prem infrastructure.
See on Prem infrastructure Okta will enable the firm to provide a better user experience to its employees and institutional clients, while meeting the finance industries high standard for security under armour, one of the world's largest athletic performance brands was a great new okta customer identity win as <unk>.
Speaker 2: Okta will enable the firm to provide a better user experience to its employees and institutional clients while meeting the finance industry's high standard for security.
Speaker 2: Under Armour, one of the world's largest athletic performance brands, was a great new Okta customer identity win. As the pandemic created a significant shift in purchase behavior towards digital, they needed to quickly identify a solution capable of unifying legacy direct-to-consumer applications to modernize the way it was connecting with its consumers. Okta's low-code, easy-to-integrate, and scalable solution is helping Under Armour create a seamless, more consistent experience across millions of monthly consumer interactions.
The pandemic created a significant shift in purchase behavior towards digital they needed to quickly identify a solution capable of unify and legacy direct to consumer applications to modernize the way it was connecting with its consumers often low code easy to integrate and scalable solution is helping under armour accretive seamless more consistent experience across mill.
<unk> of monthly consumer interactions.
Speaker 2: A Fortune 100 financial services company was a great new Auth0 win in Q3. They are deploying Auth0 as the identity layer for their B2B applications, allowing the company to focus their development resources on their core products. It's a great first step, and we see a lot of opportunity to further partner with this global company in the future.
A fortune 100 financial services company was a great New officer a win in Q3, they are deploying off zero as the identity layer for their <unk> applications, allowing the company to focus their development resources on their core products. It's a great first step and we see a lot of opportunity to further partner with this global company in the future.
<unk>.
Speaker 2: Combining forces with Auth0 accelerates our penetration into the massive SIAM market. One area that we are particularly excited about is the opportunity to cross-sell into each other's customer base.
Combining forces with <unk> zero accelerates our penetration into the massive Siam market. One area that we are particularly excited about is the opportunity to cross sell into each other's customer base.
Speaker 2: While we've only been a combined company for two quarters, we're already seeing some great cross-sell activity. Auth0 customers that became new Okta Workforce customers include NASCAR, SIGTECH, Yohana, and Topin Printing, a global 1,000 company.
Well, we've only been a combined company for two quarters, we're already seeing some great cross sell activity.
Zero customers that became new okta workforce customers include NASCAR sick Tech Johan <unk> and <unk> printing are global 1000 companies.
Speaker 2: We also had a large financial services customer of Okta sign on as a new Auth0 customer. This company has millions of customers and billions of dollars in funded loans. They've been a great Okta customer since 2017, using Okta Workforce products to secure their infrastructure, scale rapidly, and improve its security posture.
We also had a large financial services customer of Okta.
<unk> is a new off through a customer. This company has millions of customers and billions of dollars in funded loans they've been a great okta customer since 2017, using okta workforce products to secure their infrastructure scale rapidly and improve its security posture as the company grew it was looking for a trusted partner.
To replace our legacy home built system and free up its engineering resources, often off zero or collaborated to identify which solution will be the best fit and aligned on off zero due to its ease of use extensibility and scalability with millions of logins per month, the company looks to improve the member experience as <unk>.
Speaker 2: OCTA and OffZero collaborated to identify which solution would be the best fit and aligned on OffZero due to its ease of use, extensibility, and scalability.
Speaker 2: With millions of logins per month, the company looks to improve the member experience as well as enhance its security posture. We also continue to build on our public sector customer base and momentum, including a federal government win in the quarter with the Department of Transportation, Office of the Inspector General.
Well has enhanced its security posture. We also continued to build on our public sector customer base and momentum, including our federal government win in the quarter with the department of Transportation office of the Inspector General. Additionally, Okta was recently included in the first ever state ramp authorized vendor list. This inclusion demonstrates <unk> commitment.
Speaker 2: Additionally, Okta was recently included in the first ever state ramp authorized vendor list.
Speaker 2: This inclusion demonstrates Okta's commitment to helping state and local governments drive transformation across their platforms.
To helping state and local governments drive transformation across our platforms.
Speaker 2: State Ramp authorization gives government and procurement officials confidence in a service provider's data security capabilities and provides a central location for sourcing State Ramp verified SAS solutions.
State ramp authorization gives government and procurement officials confidence and our service providers data security capabilities and it provides a central location for sourcing state ramp verified SaaS solutions.
Speaker 2: We've already seen great success with state agencies, including Kansas, Illinois, Iowa, and Montana. We're also experiencing success with local government agencies, including the cities of Los Angeles and Las Vegas and Larimer County. It's still early innings for Okta within the public sector and we're excited to build on this opportunity.
We've already seen great success with state agencies, including Kansas, Illinois, Iowa and Montana.
We're also experiencing success with local government agencies, including the cities of Los Angeles, and Las Vegas, and Larimer County. It is still early innings for okta within the public sector and we're excited to build on this opportunity.
Speaker 2: Over the past 13 plus years, Okta has established itself as the leader in identity and access management. We're a trusted partner with our customers, and we've built that trust with great products and great service. At our virtual showcase event in October , we highlighted new features and innovations from Okta's customer identity, such as device authorization grant, branding, and customer admin roles.
Over the past 13 plus years after has established itself as the leader in identity and access management.
We're a trusted partner with our customers and we built that trust with great products and Great service at our virtual showcase event in October we highlighted new features and innovations from okta customer identity, such as device authorization grant branding and customer admin roles. We also announced the availability of the Asa zero platform and as on Azure.
Speaker 2: We also announced the availability of the Auth0 platform on Azure.
Or.
Speaker 2: The addition of Azure as an Auth0 private cloud platform option unlocks a secure cloud deployment option for organizations seeking strategic fit with their technology stack.
The addition of Azure as an osteo private cloud platform option unlocks a secure cloud deployment option for organizations seeking strategic fit with their technology stack.
Speaker 2: Other exciting news from Showcase was that we've decoupled workflows from advanced lifecycle management to better capture the value that customers are getting with new tiered pricing for paid users. Okta Workflows automates complex identity-centric business processes for many of the world's leading brands, including Sonos, Slack, Intercom, and Moody's.
Other exciting news from showcase was that we've decoupled workflows from advanced lifecycle management to better capture the value that customers are getting with new tiered pricing for paid users okta workflows automates complex identity centric business processes for many of the world's leading brands, including Sonus slack Entercom and Moody's.
Speaker 2: Now, any customer can leverage the power of Okta workflows to solve any identity use case, from provisioning and security, to customer privacy, and more. Workflows will be a key offering within our IGA portfolio. On that front, we continue to make great progress on the development side for both our IGA and PAM initiatives. In fact,
Now any customer can leverage the power of okta workflows to solve any identity use case from provisioning and security to customer privacy and more workflows will be a key offering within our Iga portfolio on that front, we continued to make great progress on the development side for both our Iga and Pam initiatives in fact.
Speaker 2: We had an overwhelming response to invitations to our IGA beta, including Marquee Logos. It's clear to us that customers are hungry for cloud-first alternatives to their IGA and PAM initiatives, and Okta has become a trusted partner for their identity solutions.
We had an overwhelming response to an invitation to our Iga beta, including marquee logos, it's clear to us that customers are hungry for a cloud first alternatives to their Iga and <unk> initiatives and okta has become a trusted partner for their identity solutions.
Speaker 2: Our growing customer base and strong retention rate is great validation of our business. It's also nice to receive third-party recognition of our leadership as well. Gartner recently published their 2021 Access Management Magic Quadrant evaluation. And I'm proud to say that Okta was named a leader for the fifth consecutive year and was positioned highest on the ability to execute access of any vendor in the evaluation. Auth0 was also named a leader for the first time.
Our growing customer base and strong retention rate is great validation of our business. It's also nice to receive third party recognition of our leadership as well Gartner recently published their 2021 access management Magic quadrant evaluation and I'm proud to say that okta was named a leader for the fifth consecutive year and was positioned highest.
On the ability to execute axis of any vendor in the evaluation of zero was also named a leader for the first time.
Speaker 2: I also want to take a minute to recognize the progress we've made on the ESG front. Earlier this year, we made a commitment to achieving 100% renewable electricity for our global real estate footprint by 2022.
I also want to take a minute to recognize the progress we've made on the ESG front earlier. This year, we made a commitment to achieving 100% renewable electricity for our global real estate footprint by 2022.
Speaker 2: We advanced the program rapidly and recently announced we reached that goal for our global offices and employees' work-from-home consumption.
We advanced the program rapidly and recently announced we reached that goal for our global offices and employees work from home consumption. We've recently published an ESG factsheet on our website, which contains more detailed information on this as well as all the other great work, we're doing on this front I want to highlight that this past quarter.
Speaker 2: We've recently published an ESG fact sheet on our website which contains more detailed information on this, as well as all the other great work we're doing on this front. I want to highlight that this past quarter we celebrated the fifth anniversary of the founding of Okta for Good, our social impact arm. Our goal is to strengthen the connections between people, technology, and communities.
We celebrated the fifth anniversary of the founding of Okta for good our social impact arm. Our goal is to strengthen the connections between people technology and community and we will continue to commit our most valuable resources, our people products and dollars to this work before I get to the financial review I wanted to give a quick update on the CFO search.
Speaker 2: and we'll continue to commit our most valuable resources, our people, products, and dollars to this work.
Speaker 2: Before we get to the financial review, I wanted to give a quick update on the CFO search. We're being very thoughtful with the process, and it's always difficult to project timelines. In the meantime, Brett and team have been doing a fantastic job, and they've earned trust and confidence both internally and externally.
We're being very thoughtful with the process and it's always difficult to project timelines in the meantime, Brett and team have been doing a fantastic job and they've earned trust and confidence both internally and externally I'll close by saying that we remain excited about the trends we're seeing in our business Q4 is always our biggest quarter of the year and it's off to a good start.
Speaker 2: I'll close by saying that we remain excited about the trends we're seeing in our business.
Speaker 2: Q4 is always our biggest quarter of the year, and it's off to a good start. It's clear that the market continues to move toward a modern cloud-first approach to identity.
It's clear that the market continues to move toward a modern cloud first approach to identity with our unmatched array of cloud native identity solutions that solve a wide range of use cases. It's also clear that okta is best positioned to capture and execute against the $80 billion total addressable market opportunity.
Speaker 2: With our unmatched array of cloud-native identity solutions that solve a wide range of use cases, it's also clear that Okta is best positioned to capture and execute against the $80 billion total addressable market opportunity.
Speaker 5: I'll now turn it over to Brad to walk you through more of our Q3 financial details and how we're raising our outlook for the fiscal year. Thanks, Todd, and thank you, everyone, for joining us. As we noted last quarter, Okta and OpZero are integrating quickly and will only be breaking out OpZero's gap revenue and net loss for Q3 and Q4 of this fiscal year. With that, I will now highlight some of the results for the third quarter as well as provide our business outlook.
Now I'll turn it over to Brett to walk you through more of our Q3 financial details and how we are raising our outlook for the fiscal year.
Thanks, Todd and thank you everyone for joining us as we noted last quarter. After an op zero are integrating quickly and will only be breaking out <unk> GAAP revenue and net loss for Q3 and Q4 of this fiscal year.
With that I will now highlight some of the results for the third quarter as well as provide our business outlook.
Speaker 5: Total revenue for the third quarter increased 61%, driven by a 63% increase in subscription revenue. Subscription revenue represented 96% of our total revenue. On an Okta standalone basis, total revenue grew 40%. Off zero revenue, net of $4 million in recognized purchase accounting adjustments was $46 million.
Total revenue for the third quarter increased 61% driven by a 63% increase in subscription revenue subscription revenue represented 96% of our total revenue on an artist Standalone basis total revenue grew 40% off zero revenue net of $4 million in recognized perched.
This accounting adjustments was $46 million.
Speaker 5: RPO or backlog, which for us is contracted subscription revenue both billed and unbilled that has not yet been recognized, grew 49% to $2.35 billion.
Our <unk> or backlog, which for US is contracted subscription revenue both billed and Unbilled that has not yet been recognized grew 49% to 235 billion.
Speaker 5: Current RPO, which represents subscription revenue, we expect to recognize over the next 12 months, also experienced strong growth of 57% to $1.18 billion.
Current IPO, which represents subscription revenue, we expect to recognize over the next 12 months also experienced strong growth of 57% to one $1 8 billion.
Demand for our products remains robust driven by the macro trends that Todd mentioned earlier calculated billings growth in the third quarter was driven by strength across new and existing customers for both <unk> and <unk> zero.
Speaker 5: Demand for our products remains robust, driven by the macro trends that Todd mentioned earlier. Calculated billings growth in the third quarter was driven by strength across new and existing customers for both Okta and Auth0. Both total and current calculated billings grew 54%.
Both total and current calculated billings grew 54%.
Speaker 5: Calculated Billings includes the effect of Billings process improvements that were enacted at the end of the first quarter of FY22. Excluding the Billings changes, Calculated Billings grew 53%. Turning to retention, our dollar-based net retention rate for the trailing 12-month period was 122%, reflecting the strong upsell motion we are seeing with our existing customers across both Okta and Auth0, as they expand on both products and users.
Calculated billings includes the effect of billings process improvements that were enacted at the end of the first quarter of FY 'twenty two.
Excluding the billings changes calculated billings grew 53% turning to retention our dollar based net retention rate for the trailing 12 months period was 122%, reflecting the strong upsell motion, we are seeing with our existing customers across both <unk> and <unk> zero as they expand on both products and users.
Speaker 5: Consistent with prior quarters, gross retention rates remain very healthy and reflect the value of our products to our customers.
Consistent with prior quarters gross retention rates remained very healthy and reflect the value of our products to our customers.
Speaker 5: The net revenue retention rate may fluctuate from quarter to quarter as the mix of new business, renewals, and upsells fluctuates.
The net revenue retention rate may fluctuate from quarter to quarter as the mix of new business renewals and Upsells fluctuate.
Speaker 5: Before turning to expense items and profitability, I'll point out that I will be discussing non-GAAP results going forward.
Before turning to expense items and profitability I will point out that I'll be discussing non-GAAP results going forward.
Speaker 5: Now looking at expenses, operating expenses grew 70% and is primarily attributable to the inclusion of Office Zero. Total headcount now stands at nearly 4,600 employees, up 76%. Moving to cash flow. Free cash flow was $33 million, which yielded a 10% free cash flow margin. The strong free cash flow generation was primarily driven by beneficial working capital.
Now looking at expenses operating expenses grew 70% and is primarily attributable to the inclusion of often zero.
Total head count now stands at nearly 4600 employees up 76% moving to cash flow free cash flow was $33 million, which yielded a 10% free cash flow margin.
This strong free cash flow generation was primarily driven by beneficial working capital.
Speaker 5: We ended the third quarter with a strong balance sheet anchored by $2.48 billion in cash, cash equivalents, and short-term investments.
We ended the third quarter with a strong balance sheet anchored by $2 $48 billion in cash cash equivalents and short term investments.
Speaker 5: Now let's get into our financial outlook for Q4 and FY22. We had strong Q3 results and maintained conviction in the secular market tailwinds and our leadership position in the identity market. We're making great progress integrating off zero and continue to be prudent and thoughtful about the rate and pace of near-term integration and synergies. This is where
Now, let's get into our financial outlook for Q4, and FY 'twenty two.
We had strong Q3 results and maintain conviction and the secular market tailwind and our leadership position in the identity market.
We're making great progress integrating <unk> and continue to be prudent and thoughtful about the rate and pace of near term integration and synergies.
This is reflected in our guidance with that as a backdrop for the fourth quarter of FY 'twenty. Two we expect total revenue of $358 million to $360 million, representing a growth rate of 53% year over year non-GAAP operating loss of $35 million to 34.
Speaker 5: With that as a backdrop, for the fourth quarter of FY22, we expect total revenue of $358 million to $360 million, representing a growth rate of 53% year over year, non-gap operating loss of $35 million to $34 million, and non-gap net loss per share of 25 cents to 24 cents, assuming weighted average shares outstanding of approximately 154 million.
<unk> million dollars and non-GAAP net loss per share of 25 to 24 cents.
Assuming weighted average shares outstanding of approximately $154 million.
Speaker 5: For the full year FY22, given our strong Q3 results and expectations for a strong Q4, we are raising our revenue outlook.
For the full year FY 'twenty, two given our strong Q3 results and expectations for a strong Q4, we are raising our revenue outlook. We now expect total revenue of $1 $2 75 billion to $1 277 billion.
Speaker 5: We now expect total revenue of $1.275 billion to $1.277 billion, representing growth of 53% year over year.
Representing growth of 53% year over year.
Speaker 5: We also now expect non-GAAP operating loss of $85 million to $84 million and non-GAAP net loss per share of $0.53 to $0.52.
We also now expect non-GAAP operating loss of $85 million to $84 million and non-GAAP net loss per share of 53 to 52.
Speaker 5: assuming weighted average shares outstanding of approximately 147 million.
Assuming weighted average shares outstanding of approximately $147 million.
Speaker 5: We continue to believe that current RPO is a better metric than calculated billings to measure quarterly performance as it provides a more predictable and consistent view of the business. Here are a few comments to help with modeling the full year FY22.
We continue to believe that current <unk> is a better metric and calculated billings to measured quarterly performance as it provides a more predictable and consistent view of the business here are a few comments to help with modeling the full year FY 'twenty two.
Speaker 5: First, we continue to expect current RPO growth to remain strong with growth similar to subscription revenue growth. Note that our subscription revenue growth expectations have been raised following our strong Q3 results.
First we continue to expect current IPO growth to remain strong with growth similar to subscription revenue growth note that our subscription revenue growth expectations have been raised following our strong Q3 results.
Speaker 5: Second, we continue to expect calculated billings growth to outpace subscription revenue growth by low double digits for the year. This projects an acceleration in the billings growth rate from Q3 to Q4.
Second we continue to expect calculated billings growth to outpace subscription revenue growth by low double digits for the year.
This project is an acceleration in the billings growth rate from Q3 to Q4.
Speaker 5: And finally, we continue to expect free cash flow margin to be in the positive mid-single digit range.
And finally, we continue to expect free cash flow margin to be in the positive mid single digit range.
Speaker 5: While we are in the early phases of financial planning, we would also like to provide a preliminary view of our revenue outlook for FY23. Identity continues to be a primary area of focus for all companies, and our market-leading position sets us up well for the next year and beyond. We currently estimate total revenue to be in the range of $1.745 billion to $1.755 billion, representing growth of 37%.
While we are in the early phases of financial planning, we would also like to provide a preliminary view of our revenue outlook for FY 'twenty three.
Identity continues to be a primary area of focus for all companies in our market leading position sets us up well for the next year and beyond we currently estimate total revenue to be in the range of 175 billion.
To $175 5 billion.
Representing growth of 37%.
Speaker 5: To wrap things up, we had a great quarter and are extremely excited about the $80 billion market opportunity in front of us.
To wrap things up we had a great quarter and are extremely excited about the $80 billion market opportunity in front of us.
Speaker 5: Octa is very well positioned to build on its strong foundation and market leadership position, which gives us continued confidence in our long-term outlook of $4 billion in revenue in FY26, growing at least 35% in each year through FY26, and 20% free cash flow margin in FY26. With that, I'll turn it back to Dave for Q&A. Dave?
<unk> is very well positioned to build on its strong foundation and market leadership position, which gives us continued confidence in our long term outlook of $4 billion in revenue in FY 'twenty six drilling at least 35% in each year through FY, 'twenty, six and 20% free cash flow margin.
26 with that I'll turn it back to Dave for Q&A, Dave.
Speaker 4: Great, thanks, Brett. To indicate that you have a question, please click on the raise hand icon. I see that a number of you have already done so.
Great. Thanks, Brett to indicate that you have a question. Please click on the raise hand icon I see that number of you have already done so and I will announce it when it's your turn to ask a question and in the interest of time. Please limit yourself to one question and one follow up question, so with that let's get into it I see Rob Owens. Please go ahead.
Speaker 4: question and in the interest of time please limit yourself to one question and one
Speaker 4: So with that, let's get into it. I see Rob Owens. Rob, please go ahead.
Sure.
Speaker 6: Great. Thanks, Dave. And thanks for taking my question. I want to drill down into public sector and the opportunity in front of you both.
Great. Thanks, Dave and thanks for taking my question wanted to drill down into public sector and the opportunity in front of you. Both on the Federal front you mentioned large contract obviously with the executive Board and there is a focus around identity and multifactor authentication, but also with your state ramp on the state and local side.
Speaker 6: On the federal front, you mentioned large contract. Obviously, with the executive order, there's a focus around.
Speaker 6: Identity and multi-factor authentication, but also with your state ramp on the state and local side, just curious, you know, as you weigh these opportunities, how long till they come to fruition and a couple years down the road, how much of the revenue mix could the public sector be?
Just curious now as you weigh these opportunities how long until they come to fruition.
A couple of years down the road, how much of the revenue mix could the public sector.
Hey, Rob Thanks for the question.
It's a really important segment for us public sector in general.
Speaker 2: It's a really important segment for us public sector in general, and it's a big part of the overall economy and it's a big part of it spend as a result of that. So it is a and like every other organization that has a big reliance on technology going forward.
And it's a big part of the overall economy and it is a big part of it spend as a result of that so it is and like every other organization that has a big reliance on technology going forward.
Speaker 2: There's a big reliance on identity within that technology, and so it's a big part of our priority.
Theres, a big reliance on identity.
Within that technology, and so it's a big part of our priority specifically, we're seeing a ton of success in public sector. As we mentioned some of the examples and the federal group. This past quarter had one of their best quarters ever. So we're really bullish on that part of the market. We're focused going into next year on furthering our certification which will continue.
Speaker 2: Specifically, we're seeing a ton of success in public sector, as we mentioned some of the examples. And the federal group this past quarter had one of their best quarters ever. So we're really bullish on that part of the market. We're focused going into next year on furthering our certifications, which will continue to help us in federal. You mentioned the executive order that gives.
To help us in federal you mentioned the executive order that gives some even further clarity in everyone's mind, that's buying technology buying identity in that sector. How important security is and what an identity solution can do for you on zero Trust can do for you and what multifactor can do for you that's really bullish but for that sector.
Speaker 2: even further clarity in everyone's mind that's buying technology and buying identity in that sector, how important security is and what an identity solution can do for you, what Zero Trust can do for you, and what multifactor can do for you. That's really bullish for that sector.
Speaker 2: But there are some specific requirements and certifications, FedRAMP, or we mentioned StateRAMP, but the thing that's really exciting about that is it's going to, a lot of those trends are going to be in every industry and they are in every industry and every company that's trying to think about how they can do more technology, how they can stay secure, how they can transform digitally. And the world is.
But there are some specific requirements and certification fed ramp are we mentioned state round, but.
The thing Thats really exciting about that is it's got a lot of those trends are going to be in every industry and they are in every industry and every company. That's trying to think about how they can do more technology, how they can stay secure how they can transform digitally and the world is.
Speaker 2: as it has for a couple of years now, really figuring out that identity is at the core of that.
As it has for a couple of years now really figuring out that identity is at the core of that.
Speaker 2: If you look at surveys, the CIO surveys, a lot of you folks do that are really helpful. We look at them. Identity and security are at the top of all those. And that, as much as anything, is a great
And if you look at surveys the CIO surveys a lot of you folks do that are really helpful. We look at them identity and security are at the top of all of those and that as much as anything is it.
Great.
Speaker 2: It portends very well for our future and for our advancement toward this $80 billion TAM we talk about.
Portends very well for our future and for our.
Advancement toward this $80 billion Tam we talk about.
Speaker 5: Rob, I'll just add one comment to what Todd was saying, which is, you know, Federal did have a great quarter, like Todd was saying, and actually it was our fastest growing area in the company. So it was really quite great results in Q3. Thanks, guys.
Rob This is Brad just want to add one comment to establish languages federal did.
Quarter like Tom was saying it actually was our fastest growing area in the company. So this is really quite great results in Q3.
Thanks Curt.
Next let's go to Brian Essex at Goldman Sachs.
Great. Thank you very much. Thank you for taking the question and nice set of results.
Speaker 7: Great, thank you very much. Thank you for taking the question and a nice set of results. I guess maybe if I could touch on NRR real quick, you know, still a good number, 122%. And I think you spoke to, you know, really nice success, cross-selling, upselling, you know, particularly within the Austerial customer base.
I guess, maybe if I could touch on in a real quick.
Still a good number on a 22% and I think you spoke to.
Really nice success cross selling upselling.
And particularly with the within the within the Asa Arrow customer base.
Speaker 7: Could you maybe touch on some of the other inputs into that number, such as were there any pricing increases, how it's churned, maybe give us a little more color to better understand that number, particularly on a relative basis, considering how it's been over the past few quarters.
But could you just maybe touch on some of the other inputs into that numbers such as with any pricing increases how has churn maybe give us a little more color to better understand that number, particularly on a relative basis.
Considering how its been over the past few quarters.
Yeah, Hi, Brian Thanks for the question and happy to talk about that so.
Speaker 3: Yeah. Hi, Brian . Thanks for the question. Happy to talk about that.
Our dollar based net retention as you said was 122% this quarter, which we're very excited about I think historically, we've said that it would be in the $1 15 to $1 20 range. It's been above that for some quarters now as you noted and continues to be very very strong.
Speaker 3: It's kind of a tricky one because if we get too many net new logo acquisitions, the dollar based net retention goes down. If we cross sell and upsell and make everyone happy on that front, it goes up. So you win, you lose, either way, we're very happy with that number. I will also note that it was the highest gross retention that we've ever had in a quarter, so that continues to go very well. I think what you're really seeing is the breadth and the power of the platform. There's more and more cross sell and upsell opportunity as well as net new logo acquisition.
It's kind of a tricky one because if we get too many net new logo acquisition. The dollar based net retention goes down if we cross sell and up sell make everyone happy on that front. It goes up so you Wayne you there either way.
Very happy with that number I will also note that it was the highest gross retention that we've ever had in a quarter. So that continues to go very well I think what you're really seeing is the breadth and the power of the platform. There is more and more cross sell and up sell opportunity as well as net new logo acquisition at the Standalone added 700.
Speaker 3: OctoStandalone added 700 new customers.
New customers over 700, new customers this past quarter, our zero added another 200, plus so a lot of net new customer acquisition at the same time, you are seeing a lot of that.
Speaker 3: Over 700 new customers this past quarter. Auth0 added another 200 plus, so a lot of net new customer acquisition. At the same time, you're seeing a lot of that great Auth0 cross-sale that's already happening just two quarters into the integration that we were really optimistic on, both Auth0 customers becoming new Okta workforce customers.
Cross sell that's already happening just two quarters into the integration and we're really optimistic on both audio customers, becoming new okta workforce customers and the inverse where someone's been using okta for a long time now theyre comfortable with.
Speaker 7: and the inverse where someone's been using Okta for a long time. Now they're comfortable with Auth0 since they're part of a public company. So that's going very well and I expect that to continue. So really across the board, we're very happy with that. It's a very solid number and I think you're going to see more of that in Q4 and going into next year. It sounds like maybe more of a mixed shift issue then.
They're part of a public company. So that's gone very well and I expect that to continue so really across the board, we're very happy with that as a very solid number and I think youre going to see more of that in Q4 and going into next year. It sounds like maybe more of a mix shift issue than anything else.
Speaker 3: Yeah, I mean, it's you know, we don't manage it specifically, there's no specific number we're targeting. Like I said, it goes up, it goes down either way. Overall Q3 revenue grew 61% year over year, RPO grew 49% year over year to $2.35 billion. And those are some of the top line metrics we focus on.
Yeah.
We don't manage it specifically, there's a specific number we're targeting like I said it goes up it goes down either way overall Q3 revenue grew 61% year over year, RPM, 49% year over year to $2 5 billion.
Those are some of the top line metrics and focus on yeah, It's interesting Brian.
Speaker 2: Yeah, it's interesting, Brian . Freddie mentioned the gross retention. It's been super, I was just looking at the graph earlier today. It's been super, super steady for eight to 10. I mean, I was looking back eight to 10 quarters. Even before that, it's been super steady over time.
Freddie mentioned in the gross retention, it's been Super I was just looking at the graph.
Earlier today, it's been Super Super steady for eight to 10, I mean, I was looking back eight to 10 quarters, even before that it's been super steady overtime.
Great very helpful. Thank you.
Speaker 1: All right, next question is from Adam Kindle at Raymond James. Adam?
Alright next question is from Adam Tindle Raymond James.
This is Adam.
Adam I don't know if we can hear you I see a document I can't hear you.
Alright.
Speaker 8: So, this is a question for you, Freddy, and maybe Todd can comment, but Brett talked about billings from Q3 to Q4 accelerating, you know, that expectation built in. Maybe you could comment on some of the near-term drivers of that underneath it. And coming into this year, if I remember correctly, your initial guidance was for around 30% growth. Now Brett's talking about an outlook for 37% growth next year.
So is the question for you Freddie and Todd can comment, but Brett talked about billings from Q3 to Q4 accelerating that expectation built in maybe you could comment on some of the near term drivers of that underneath it and coming into this year, if I remember correctly your initial guidance.
For around 30% growth now Brett is talking about an outlook for 37% growth next year. Most of that is organic and youre working on bigger numbers. So it sounds like that growth acceleration is expecting to continue maybe just talk about some of the drivers underpinning that confidence.
Speaker 8: most of that's organic and you're working on bigger numbers so it sounds like that growth acceleration is expecting to continue. Maybe just talk about some of the drivers underpinning that competition.
Speaker 3: Yeah, absolutely. I'll talk about that at a high level. And then Brett can talk a little bit of some of the details around billing. First of all, you know, we're very excited about that long range plan. We continue to reiterate it. I think it's very solid 35% plus growth each year through FY 26.
Yeah, absolutely I'll talk about that at a high level and then Brett can talk a little bit about some of the details around billing.
First of all we're very excited about that long range plan. We continue to reiterate it I think its very solid 35% plus growth each year through FY 'twenty six getting us to $4 billion of revenue and 20% Mcf margin, that's something that we're doing very well and tracking to your Q4 is a really big quarter for us.
Speaker 3: getting us to $4 billion of revenue and 20% FCF margins. That's something that we're doing very well in tracking Q. Q4 is a really big quarter for us.
Speaker 3: You know, we look a lot more these days, and I think you see it more and more in the industry, shifting from a focus on billings that have duration and they have timing and all sorts of other adjustments.
A lot more these days and I think you'd see it more and more of the industry shifting from a focus on billings that have duration and they have timing and all sorts of other adjustments to RPI and frankly <unk> in total IPO, both of which are doing very well when we look at our CRP number 57% year over year growth going into.
Speaker 3: to RPO, frankly, CRPO and total RPO, both of which are doing very well. When we look at a CRPO number of 57% year-over-year growth going into Q4, I think that's very solid. Q4 historically has been our strongest quarter. It's lining up very, very well. And as we get more and more into these large enterprises with growth rates of customer cohorts
Q4, I think Thats very solid Q4, historically has been our strongest quarter, it's lining up very very well and as we get more and more into these large enterprises with growth rates of customer cohorts with 250000, plus AC 500000, plus ACD 1 million plus ACD, all growing 50% or higher you really.
Speaker 3: 250,000 plus ACV, 500,000 plus ACV, 1 million plus ACV, all growing 50% or higher. You're really starting to see that that pipeline generated for next year as well. And when we think about total RPO and CRPO, those are the big metrics that we think are very interesting. Fred, if you wanna comment specifically on Q3 Billings, that might be helpful.
Starting to see that pipeline generated for next year as well and when we think about total rpms. The IPO. Those are the big metrics that we think are very interesting, but if you want to comment specifically on Q3 billings that might be helpful. Yeah, absolutely. So Q3, I think Adam's question is more around Q4 billion. So I can I can take that on the acceleration Matthew to talk about Q3 as well.
Speaker 5: Yeah, absolutely. So Q3, well, I think Adam's question is more around Q4 billing, so I can take that on the acceleration. I'm happy to talk about Q3 as well if that helps, Adam.
That helps.
Speaker 5: So a Q4 billions acceleration, you know, based on what we're talking about as.
So Q4 billings acceleration based on what we're talking about.
Speaker 5: fiscal year 22 billings growth, outpacing subscription revenue growth by low double digits.
Fiscal year 'twenty, two billings growth outpacing subscription revenue growth by low double digits that implies an acceleration like youre, saying from Q3 to Q4, and that's really a factor of two things one.
Speaker 5: that implies an acceleration like you were saying from Q3 to Q4 and that's really a factor of two things. One, the the billings process change that we implemented in Q1 had a very small effect in Q3 as you can see by the numbers 54 percent with the effect growth 53 percent without the effect and when we look forward into Q4 we believe that effect will grow.
The billings process change that we implemented in Q1.
A very small effect in Q3 as you can see by the numbers, 54% with the effect growth, 53% without the effects.
And when we look forward into Q4, we believe that effect will grow and then on the second point just like with Freddie was talking about there is a tremendous amount of momentum headed into the final quarter of the year and as I think we've talked about for the last few years Q4 is our seasonally strongest quarter and we expect to have a very strong Q4. So you combine the operational impact and.
Speaker 5: And then on the second point, just like what Freddie was talking about, there's a tremendous amount of momentum headed into the final quarter of the year. And as I think we've talked about for the last few years, Q4 is our seasonally strongest quarter. And we expect to have a very strong Q4. So you combine the operational impact and the outlook we have for Q4 of strength going into the final quarter of the year. And you get that acceleration and growth rate on billing.
The outlook, we have for Q4 of strength going into the final quarter of the year and you get that acceleration in growth rate on billings.
Speaker 8: Got it. That's helpful. Maybe just as a follow-up for Todd, I wanted to ask a question on workflows. I know it's early, but, you know, kind of both on the tech and the pricing model, wondering what you're learning, you know, from customers on feedback around the technology and on the economic model or pricing model. It's kind of similar to Auth0 with some pre-workflows up front and wondering what the feedback is on that, if you foresee perhaps adopting that economic model more broadly in other areas as well. Thank you.
Got it that's helpful. Maybe just as a follow up for Todd I wanted to ask a question on workflows I know, it's early but you know kind of both on the tech and the pricing model wondering what youre learning from customers on feedback around the technology and on the economic model, our pricing model, it's kind of similar to off zero with some free workflows.
And wondering what the feedback is on that if you're foreseeing, perhaps adopting that economic model more broadly in other areas as well. Thank you.
Yeah.
Can you hear me okay.
Speaker 2: Perfect. Okay. Tried some new camera this time. Didn't work too well, but I'm back.
Perfect Okay.
Tried to new camera this time didn't work through but I'm back.
Speaker 2: It's going really well. We're really excited about workflows and I think it's, we talked about a showcase workflows for any identity use case which takes the workflows platform service and breaks it apart from the package of advanced lifecycle management so a customer can use it for any identity use case and
It's going really well, we're really excited about workflows and I think we talked about a showcase workflows for any idea any use case, which takes the workflows platform service and Brexit apart from the package of <unk>.
Advanced lifecycle management, so a customer can use it for any idea any use case.
<unk>.
Speaker 2: Workflows is very powerful. It's essentially, you can write any program, you can automate any process in a way that's visual. You don't have to have programmers do it, you can do it in a visual flow. So it's very powerful. What we've learned as customers were using the advanced workflows as part of the advanced lifecycle management product, was that it was very powerful and they could do a lot with it, and it drove big deals and big upsells.
Workflows is very powerful it's essentially you can write any program you can automate any process.
In a way Thats visual programmers do it you can do it in the visual flow. So it is very powerful what we've learned is customers are using the <unk>.
Advanced workflows as part of the advance lifecycle management product was that it was very powerful and they can do a lot with it and it drove big deals and big Upsells.
Speaker 2: So that's why we made the decision to get it used more broadly in the customer base because we want customers doing more with our platform, we want customers.
So that's why we made the decision to get it used more broadly in the customer base, because we want customers doing more with our platform, we want customers connecting it to more systems and automated more identity centric business processes and workflow. So it's early showcase we just announced this a couple months ago showcase, but we're very excited about it.
Speaker 2: Connecting it to more systems and automating more identity centric business processes with workflow. So it's early showcase. We just announced this Couple months ago showcase, but we're very excited about it. We have learned interesting things like the way you the way you Document it and train people and how the services teams in the partner community interacts with
We have learned interesting things like the way you the way you.
Documented and trained people and how the services teams in the partner community interacts with.
Speaker 2: the platform service and with customers needs to evolve because it expands the scope and the power of what you can do with our platform. And so the partner community and the services team and the customer's expectations and how they're educated are even broadened with this platform service. So I think you're gonna see a lot of great things from this change. And it's part of a bigger trend, which is something we've been doing. You saw the video at the beginning of the call about the Okta Identity Engine. It's making Okta into a broader, more powerful platform because identity is at the core of all these things customers are trying to do, but it has to support every use case.
The platform service and with customers' needs to evolve because it expands the scope and the power of what you can do with our platform and so the partner community and services team and the customers' expectations and how they're educated or even broadened with this platform service. So I think youre going to see a lot of great things from this change and it's part of a bigger trend, which.
Is something we've been doing you saw the video at the beginning of the call about the okta identity engine, it's making okta into a broader more powerful platform because identity is at the core of all of these things customers are trying to do but it has to support ever use case. It has to support every every type of flow. They want to do every use case both workforce.
Speaker 2: It has to support every type of flow they want to do, every use case, both workforce and customer identity. And that's why we're building this broad platform to enable those use cases.
<unk> customer identity and Thats why we are building this broad platform to enable those use cases.
Alright, and next we're going to go to Jonathan Ho at William Blair Jonathan.
Speaker 2: And I just wanted to start out with, I guess, the strength and larger deals that you talked about. Can you give us maybe a little bit more color on what's driving that, whether it's, you know, sort of multi-product sales versus greater success with larger customers?
I just wanted to start out with I guess the strength in larger deals that you talked about can you give us maybe a little bit more color on what's driving that whether it's sort of multi product sales versus greater success with larger customers.
Yeah happy to talk about that so first of all the over the metric that we've been tracking for some time and speaking with you all about the over 100000 ACD customers that number is now at 2825, we added 215 quarter over quarter and as usual about half of those were new customers. So in addition to those other numbers I gave you.
Speaker 3: Yeah, happy to talk about that. So first of all, the over, you know, the metric that we've been tracking for some time and speaking with you all about is the over 100,000 ATV customers. That number is now at 2,825. We added 215 quarter of a quarter. And as usual, about half of those were new customers.
Speaker 3: So in addition to those other numbers I gave you, you just see the trend continuing. You know, I think it's for a few reasons. First of all, identity is becoming, it's coming front and center for everyone.
You just see that trend continuing.
I think it's for a few reasons first of all identity is becoming coming front and center for everyone. It might've been something that really just the early adopters of technology, we're thinking about some years ago, but it's the largest organizations in the world that are realizing the importance of identity because of the three big trends that we talk about the first one.
Speaker 3: You know, it might have been something that really just early adopters of technology were thinking about some years ago, but it's the largest organizations in the world that are realizing the importance of identity because of these three big trends that we talk about. The first one, obviously, is everyone's adopting cloud and hybrid IT.
As everyone's adopting cloud and hybrid it digital.
Speaker 3: Digital transformation, right? Most overused term in the industry, but everyone needs a better way to interact with their customers, partners, vendors, suppliers, especially when you're in this dynamic, remote e-commerce world.
Information right. So we can determine the industry, but everyone needs a better way to interact with their customers partners vendors suppliers, especially when youre in this dynamic remote E Commerce World and then finally, the underpinnings of the Zero Trust security and when we talk with larger organizations.
Speaker 3: And then finally, the underpinnings of zero trust security. And when we talk with large organizations, I mean, it is at the sea level. And I heard multiple times in the last couple of months.
Level and I heard multiple times in the last couple of months, we are thinking about making a 10 or 15 year decision for a foundational fundamental partner for identity and frankly for a company like US those are very exciting conversations at the and these are companies that have legacy technology. They own all the technology because they have been.
Speaker 3: We are thinking about making a 10 or 15 year decision for a foundational fundamental partner for identity, and frankly for a company like us those are very exciting conversations to be in. These are companies that have legacy technology you know they own all the technology because they've been.
Or through M&A Theyre, all around the world and they are trying to think about okay. As I simplify this for my employees and my customers. One key piece of the whole puzzle now really is coming to the forefront of identity, who can help me with this and think about not just what im trying to do today, but future proofing my environments for tomorrow.
Speaker 3: born through M&A, they're all around the world and they're trying to think about, OK, as I simplify this for my employees and my customers.
Speaker 3: One key piece of the whole puzzle now really is coming to the forefront of identity. Who can help me with this and think about not just what I'm trying to do today.
Speaker 3: but future-proofing my environments for tomorrow. Frankly, our conversations around IGA and PAM, these new products that we've announced that are gonna be coming online, are also very strong. We're getting an overwhelming response to the invitations to our IGA beta, so much so that we actually had to shut down that conversation and say, hey, we can't take any more beta customers right now. There are marquee logos, Fortune 500 companies way before I thought they would are saying, I need a modern IGA solution. Customers are hungry for these cloud-first alternatives to not only core access that we've been doing for a long time, but IGA and PAM and a lot of other things that we've got in our pockets for the years ahead. And I think you're really starting to see this momentum.
Frankly, our conversations around Iga and Pan the new products that we've announced that theyre going to be coming online are also very strong we're getting an overwhelming response to the invitations to our Iga beta so much though that we actually had to shut down that conversation and say hey, we can't take any more beta customers right. Now there are marquee logos Fortune 500 company way before.
I thought they would are saying I need a modern iga solution customers are hungry for these cloud first alternatives to not only core access that we've been doing for a long time, but iga and Pam and a lot of other things that we've got in our pockets for the years ahead and I think it really starting to see this momentum. The first question was around the federal certainly that's happening, but you go across the industry.
Speaker 9: The first question was around federal. Certainly that's happening, but you go across industries, large financial institutions, global companies, whether it's manufacturing or services, they all realize that this is like a key moment in time as they reorganize their architecture and identity is coming front and center. They are very exciting conversations to be in for sure. Great, thank you.
Large financial institution global companies, whether it's manufacturing or services. They all realize that this is like a key moment in time as they reorganize their architecture and identity is common front and center. It is they are very exciting conversations with the and for sure.
Great. Thank you.
Let's go to Josh <unk> at Wolfe Research.
Speaker 4: Hey, guys, thanks for taking my question. As we get kind of increasingly closer to this launch of your IGA and your PAM solutions, do you guys kind of have a sense of where customer demand is strongest across all three different aspects of identity security? And how do you kind of expect this to trend throughout next year?
Hey, guys. Thanks for taking my question.
As we get kind of increasingly closer to this launch of your Iga and your Pam solution do you guys kind of have a sense of where customer demand is strongest across all three different aspects of identity security and how do you kind of expect this to trend throughout next year.
Speaker 3: Yeah, absolutely. And when you say the three different trends of identity and security, are you referring to the cloud and hybrid IT, digital transformation, zero trust security, or is there something else in there? More IGA, Pam, Brzezak.
Yes, absolutely and when you say the three different trends of identity and security are you, referring to the cloud and hybrid digital transformation Zero Trust security or was there something else in there more Iga pampers assets.
Speaker 3: versus access, got it. Well, certainly our customers today are all buying access because that's what we have to offer. They are very excited about IGN PAM because these are obviously new markets that we're getting into. But look, we're not sitting here in an ivory tower coming up with good ideas on what we're gonna build next. As you can see from the Garner Magic Quadrant, there's a reason that we are positioned very high when it comes to ability to execute. We spend a lot of time making these customers successful. They want best of breed, they want independence, they want neutrality. And as a result of spending a lot of time, dollar-based net retention, all the other metrics, but also all the subjective, you can hear it in the customer speaking.
These assets got it well certainly our customers today are all buying access because that's what we have to offer.
We're very excited about IGN Pam because these are obviously new markets that we're getting into we're not sitting here in an ivory tower coming up with good ideas on what we're going to build next as you can see from the Gartner Magic quadrant Theres. A reason that we are positioned very high when it comes to the ability to execute we spent a lot of time, making these customers successful they want best of breed they want independents they want neutral.
And as a result of spending a lot of time dollar base net retention all the other metrics, but also all of the subjective you can hear it in the customers speaking.
Speaker 3: because we've spent so much time with them, they tell us what they want. And they've been asking for modern products when it comes to IGA, which is, you know, a derivative of identity. There's no one doing core IGA. It's access becomes identity becomes governance.
We spent so much time with them they tell us what they want and they've been asking for modern products. When it comes to Iga, which is a derivative of identity Theres no. One doing core Iga access becomes the identity becomes governance and so people say look I've already got all my add any subsidy cloud running okta I want the product right next to it it's going to be.
Speaker 3: And so people say, look, I've already got all my identity stuff in the cloud running on Okta. I want the product right next to it. It's going to be the governance thing so I can give the reports over to my auditors. We already do all the provisioning. So it's a pretty natural next step. You've seen the workflows, adding in some reporting. It's going to be very clean. And again.
Governance things so I can give the reports over my orders, we already do all the provisioning. So it's a pretty natural next step you've seen the workflows, adding in some reporting it is going to be very clean and again Pam same thing it's not like we're starting fresh we've got an amazing product and advanced server access it's doing very very well ECS continued to release new features like AI domain.
Speaker 3: Pam, same thing. It's not like we're starting fresh. We've got an amazing product in advanced server access. It's doing very, very well. You see us continue to release new features like AD domain join, which we did recently at our Okta showcase event, which is a very important one. And that's gonna become a huge suite as well. Now I would argue that in this cloud world, all access is privileged access. So it's pretty natural that when you're doing access, that's what it becomes.
And which we did recently at our Okta showcase event, which has been a very important one and that is going to become a huge suite as well and I would argue that in this cloud world all access its privileged access so it's pretty natural that when youre doing access that's what it becomes but look these are huge opportunities and there is going to be more of this as people adopt more of these cloud first alternatives. They are built.
Speaker 3: But look, these are huge opportunities and there's going to be more of this as people adopt more of these cloud first alternatives, they're building the solution and the vision for the future. They're not going backwards. And I think that plays very well into how we're positioned today, but especially where we're going tomorrow and in the years to come.
The solution and the vision for the future, they're not going backwards and I think that plays very well into how we are positioned today, but especially where we're going tomorrow and in the years to come.
Speaker 2: Yeah, I'll add one quick thing on that too from my perspective. I think one thing people miss about IGA and PAM is that the markets today, I think, are a tenth of the size they could be with a cloud-first product that's tightly integrated to an identity provider like Okta.
Odd one I'll add one quick thing on that too from my perspective, I think one thing people Miss about Iga and Pam is that the market today I think are a 10th of the size that it could be with a cloud first product that is tightly integrated into an identity provider like okta and when we look at building out these products and Freddie.
Speaker 2: And when we look at building out these products, and Freddie mentioned that, and I mentioned earlier about the
Mentioned that I mentioned earlier about the <unk>.
Speaker 2: the beta for IGA, and how fast that filled up, and how excited people are about that product. We want to make the market 10 times bigger than it is.
Data for Iga, and how fast that filled up and how much how excited people are about that product, we want to make the market 10 times bigger than it is today.
Speaker 2: and grow because we think a better product, easier to use, a simpler, more cloud native product can do that. So that's our mindset as we go into those markets.
And grow because we think a better product easier to use a simpler more cloud native product can do that that's our that's our mindset as we go into those markets.
Speaker 10: And I know it's still kind of super early, but since you guys have Auth0 under your belt, any noticeable change to the percentage of new customers that are landing with both Workforce and the SIAM use case right off the bat?
And I know, it's still kind of super early but since you guys have zero under your belt any noticeable change to the percentage of new customers that are landing with both workforce and the cyan use case right off the bat.
Speaker 2: Well, in aggregated, when you add off zero and they're all their business was Siam, so the percentage goes way up, which is one of the reasons why we're so excited about the combination, because
In aggregate it.
When you add ons zero and all.
All their business with science, so the percentage goes way up which is one of the reasons why we're so excited about the combination because if you if you zoom out for a minute both businesses are doing very well.
Speaker 2: If you zoom out for a minute, both businesses are doing very well. On the Okta side, we predominantly started with Workforce and then upsold our Scion platform. Always started with OptoZero Scion. But when you combine the companies, now you're telling the world that, or you're reiterating to the world that
The on the auto side, we predominantly started with workforce and uphold our science platform zero.
Always started with.
After <unk>, but when you combine the companies now you're telling the world that are you reiterating some of the world that identity is critical and okta as the preeminent independent and neutral identity provider and whether it's customer identity workforce identity, whether its iga to privileged.
Speaker 2: Identity is critical. And Okta is the preeminent, independent, and neutral identity provider. And whether it's customer identity or workforce identity, whether it's IGA or privileged, you need a trusted partner. And Okta is that at-scale trusted partner. And that's why we're so excited about the future as we continue down this integration path and build this amazing company. Thanks, guys.
Need a trusted partner in mind is that at scale trusted partner.
That's why we're so excited about the future as we continue down this integration path and build this amazing company.
Thanks, guys.
Alright, let's go to Erik Keith at Keybanc.
Speaker 2: Great, thanks for taking the question and congrats on a strong quarter. Todd, you've been a leader in the identity space and connecting users to applications and resources, but how do you think about the importance of machine identity long term, securing connections between machines or the communication of resources? Is that a market you need to address to be consolidated or the identity market more broadly? I think people are the right place to start.
Alright, Thanks for taking the question and congrats on a strong quarter Todd you better later in the identity space in connecting users to applications and resources, but how do you think about the importance of machine identity long term secure and connections between machines or communication of resources.
Is that a market you need to address to be consolidated or the identity market more broadly.
I think people are the right place to start.
And I think that yeah.
Speaker 2: you're always gonna, to some degree, secure machines. If you think about one of the powerful things about the Identity Engine technology we've talked about, is that it really, in our architecture, it puts devices as a first-class citizen in the architecture. So with the Identity Engine, you can do this super powerful policy that's different based on not just the user, but the device they're coming from.
You're always going to some degrees procure machines. If you think about one of the powerful things about the identity engine technology. We've talked about is that it really in our architecture. It puts devices as a first class citizen in the architecture. So with the identity engine you can do this a super powerful policy that's done.
Based on not just the user but the device they are coming from so that's an example of we started with the user now we've made devices a first class citizen and we give the.
Speaker 2: So that's an example of we started with the user. Now we've made devices a first class citizen and we give the customers this amazing powerful policy engine that they can tailor by device or by users. So they can say, if Todd is coming from his home device, there's a different policy than if Todd is logging in from his.
The customers. This amazing powerful policy engine, they can tailor by device or by users. So they can say this part is coming from his home device Theres a different policy. The next part is logging in from his computer at work. So our philosophy is start with user work out to the machine even in the if you look at the way our advanced server access product.
Speaker 2: computer at work. So our philosophy is start with the user, work out to the machines, even in the, if you look at the way our advanced server access product works, it is, starts with a user and then from there it maps to the machine. And we think that's the best way to do that, to solve that use case, but then also as extension to PAM use case. So that's how we're approaching it. And I think that's, that's going to be very powerful going forward.
Works is starts with the user and then from there it maps to the machine and we think that's the best way to do that to solve that use case, but then also as an extension of the Perm use case. So that's how we're approaching it and I think that that's going to be very powerful going forward.
Speaker 11: Great, and then a follow up if I may for Todd or Freddy, as you look into fiscal 23, you have a lot on your plate, of course, with marrying the go to market efforts of Okta and All CRO and rolling out two important products with IGN and PAM. So just any color on how you're thinking about making sure the sales force is well equipped to execute against that next year.
Great and then a follow up if I may for tighter Friday as you look into fiscal 'twenty three to have a lot on your plate of course, but marrying that go to market efforts of box fallout jump on products with IGN and so just any color on how youre thinking about making sure. The salesforce is well equipped to execute against that next year.
Speaker 3: Yeah, absolutely. We do have a lot on our plate and that's an exciting place to be, frankly, and that's the kind of problem we like to have.
Yeah, absolutely we do.
Have a lot on our plate and that's an exciting place to be frankly, that's the kind of problem, we like to have.
Speaker 3: We are doing very well in the integration efforts. Obviously when it comes to the back office, that's in really great shape. When it comes to a lot of the upsell, cross-sell motion, we got that figured out very quickly as we highlighted. And now another key piece of the puzzle, as you just mentioned, is the sales forces. They will be fully integrated come Feb 1, which is two short months from now when we kick off the new fiscal year. It'll all be under one umbrella. We're already doing, as you can imagine, you don't just flip the switch when you have the size of the sales force as ours, especially how fast it's growing. We already are doing a lot of work around territory management, around education, around getting all the new folks ramped on now the broader suite of products that they're gonna have to offer, but it's going very well. And I think the most exciting thing, frankly, is that
We are doing very well in the in the integration efforts obviously when it comes to the back office. That's in really great shape. When it comes to a lot of the upsell cross sell motion, we got that figured out very quickly as you highlighted and now another key piece of the puzzle as you. Just mentioned is the sales forces they will be fully integrated comes.
One which is two short months from now when we kick off the new fiscal year. It all be under one umbrella. We're already doing as you can imagine you don't just flip the switch when you have the size of the sales forces are especially how fast it's growing.
We are doing a lot of work around territory management around education around getting all the new folks ramped on the now the broader suite of products that theyre going to have to offer but it's gone very well and I think the most exciting thing frankly is that its not as though we without zero, it's not as though we brought in a new company that was you know.
Speaker 2: It's not as though we, without Xero, it's not as though we brought in a new company that was, you know, tangential or doing something pretty different than what we were doing. They were doing modern identity. We were doing modern identity. It's a very natural motion. And then finally, the cultural, I think that the cultural symbiosis that you're seeing is really phenomenal, right? Two leading innovative companies, founder-led, that both have this opportunity to say, look, we could do something foundational here, you know, for the world economy, for our customers over the next five, 10 plus years, resetting the standard for identity on the internet. That's a pretty exciting vision. And so I think that's something that everyone's getting behind. So, you know, ball's in our court. As an entrepreneur, you like being behind the eight ball. I'll take that opportunity all day long, but yeah, we're doing a lot of good planning and it's going very well and we're extremely excited. First of all, wrapping up Q4, which is going very well, and then launching into the next fiscal year. We're in the midst of our strategic and financial planning process right now. And as you mentioned...
Tangential or doing something pretty different than what we were doing it we're doing modern identity. We were doing a modern identity. It's a very natural motion and then finally, the cultural I think the cultural symbiosis that Youre seeing is really a phenomenon right two leading innovative company founder led that both have this opportunity to say look we could do something.
<unk> foundational year.
For the world economy for our customers over the next 510 plus years resetting the standard for identity on the Internet, that's a pretty exciting vision and so I think thats something that everyone's getting getting behind so both within our core as an entrepreneur you like being behind the eight ball I'll take that opportunity all day long, but yes, we're doing a lot of good planning and it's gone very well and we're extremely excited.
First of all wrapping up Q4, which is going very well and then launching into the next fiscal year.
And in the midst of our strategic and financial planning process right now and as you mentioned there is all kinds of things we could do all the things people want to do one thing thats been very clear through the whole thing the number one priority by far is executing on the customer identity access management opportunity, so making sure that over the next 12 18 24 months.
Speaker 2: there's all kinds of things we could do or things people want to do. One thing that's been very clear through the whole thing, the number one priority by far is executing on the customer identity access management opportunity.
Speaker 2: So making sure that over the next 12, 18, 24 months, we do an amazing job of winning and expanding our lead in that market.
We do an amazing job.
Winning and expanding our lead in that market and big part of that is integrating <unk> and <unk>.
Speaker 2: And a big part of that is integrating OpZero and we've offered a great start and a big milestone comes as Freddie mentioned on Feb 1 when the sales teams are fully integrated. But it's very, everyone at Okta knows that's the clear priority. We have to execute well on that and we have to extend our lead in that market. And then that really bodes well for anything else after that we want to do. Winning the SIAM market is going to set the stage for that. Great, thank you.
We are off to a great start in a big milestone comes as already mentioned on sub one when the sales teams are fully integrated but its very everyone's doctor knows that's a clear priority we have to execute well and we have to extend our lead in that market and then that really bodes well for anything else. After that we want to do winning the <unk> market is going up.
At this stage for that.
Alright, thank you.
So let's go to Sterling at Jpmorgan.
Speaker 5: Thanks Dave, hey guys, good to see you. So if I think about your guidance for next quarter and your expectation for Auth0, I think, to get to that $200 million at ARR, it kind of suggests a pretty significant slowdown in the standalone Okta. And the question is this, how much of that is just the difficulty of now carving out what's Auth0 and what's Okta, given, you know?
Thanks, Dave Hey, guys good to see.
So if I think about your guidance for next quarter and.
Your expectation for us here, I think to get to that $200 million in IRR.
It suggests a pretty significant slowdown in the stand alone after.
And the question is this how much of that is just the difficulty of now carving out whats off zero and whats okta.
Even.
Speaker 5: Prior to Auth0, you had a very good Scion business as it was.
Prior to Ontario, you had very good Siam business as it was and how much of that is maybe some other impact because I think I get a lot of questions around that standalone legacy business and how much opportunity is still left in front of you Sterling do call. It a legacy business.
Speaker 5: And how much of that is, you know, maybe some other impact? Because I think I get a lot of questions around that standalone legacy business and how much opportunity is still left in front of.
Speaker 2: Oh, Sterling, don't call it a legacy business. Yeah, wow. Sterling. OK, so I'll take that. That means I've arrived as an entrepreneur. I have a legacy. That's right.
Yeah, Sterling Oh, Okay. So I'll take that means I've arrived as an entrepreneur I believe that's true.
Right.
I'll take that and I'll, let failure Todd pile on it.
Speaker 6: I'll take that and I'll let Freddie or Todd pile on at the end, which is, I'm not totally sure where you're getting a slowdown from because if you look at any of the math, I mean, look at Okta Standalone, just in Q3 by itself, picked up revenue wise in terms of
And which is I'm not totally sure where youre getting a slowdown from because if you look at any of the math I mean look at AGA stand alone just in Q3 by itself ticked up revenue wise in terms of growth from 39% in.
Speaker 6: from 39% in Q2 to 40%.
Q2, 40% in Q3, and Thats up from 38% in Q1, so clearly theres a lot of strength in the business and if you look at the stuff that we've talked about before which is around CRP or maybe your math is on billings I'm not sure but.
Speaker 6: in Q3, right? And that's up from 38% in Q1. So clearly, there's a lot of strength in the business. And, you know, if you look at this stuff that we've talked about before, which is around CRPO, maybe your math is on billings, I'm not sure. But, but CRPO growing very strongly.
<unk> growing very strongly for the overall organization well <unk> and billings are growing very strongly because if you look at what we've said today is we've raised our expectations for both <unk> and billings by default because we've raised our subscription revenue growth expectations for the entire year, because we raised total revenue.
Speaker 6: for the overall organization. Well, both CRPO and billings are growing very strongly because if you look at what we said today, is we've raised our expectations for both CRPO and billings by default because we've raised our subscription revenue.
Speaker 6: growth expectations for the entire year because we raised total revenue at the midpoint of the guide by $30 million. So since those are both tied to those, we've obviously made an increase in expectations for both. So both are actually performing very well. You can look at any number of metrics, whether it be total customers, greater than 100K customers, the really big customers that Freddie talked about. So we're really pleased with the momentum on both sides of the house, Okta and Alcero as we exit FY22.
At the midpoint of the guide by $30 million.
So since those are both tied to that is we've obviously made a an increase in expectations for both so both are actually performing very well you can look at any number of metrics, whether it would be total customers greater than 100 gig customers that really big customers that Freddie talked about so we're.
Really pleased with the momentum on both sides of the house after an osteo as we as we exit FY 'twenty two.
I think where it was coming from was revenue midpoint of the range I think is $3 59.
Speaker 5: I think where it was coming from was revenue. Midpoint of the range I think is $3.59.
Speaker 5: If I, I think off zero contributed 46 this quarter I think we all expected to contribute more next quarter, you know, to get to that 200 million of error so if I back out just hypothetically.
I think art zero contributed 46 this quarter I think we all expected to contribute more next quarter to get to that $200 million of IRR. So if I back out just hypothetically $49 million that would leave you with somewhere just below three times, which I think would be something more in the low thirty's on growth for the rest.
Speaker 6: 49 million, that would leave you with somewhere just below 310, which I think would be something more in the low 30s on growth for the rest of the standalone versus the 40 just did. That's what I was referring to. Got it. I mean, as you know, in the past, we're obviously being just prudent with the guidance and being thoughtful about, obviously, the rate and pace of integration without zero. We're being thoughtful about big deals. I mean, it's a big quarter coming ahead. Like I said, it's the seasonally strongest quarter.
The standalone versus the 40 just.
That's what I always refer got it got it.
I mean as you know in the past, obviously being prudent with the guidance and being thoughtful about obviously the rate and pace of integration with our zero, we're being thoughtful about big deals I mean, it's a big quarter coming ahead like I said, the seasonally strongest quarter. We've got we are expecting a lot of momentum, but we also are always been very thoughtful about the quarter.
Speaker 12: We've got we are expecting a lot of momentum, but we also are always been very thoughtful about the quarter in front of us and the guys fair enough. Thank you guys.
Front of vessels guidance fair enough. Thank you guys.
Now, let's go to trigger Walsh from JMP.
Thanks, Dave Thanks for taking the question Carl Walsh on for Pat.
Speaker 13: Thanks Dave. Thanks for taking the question. Trevor Walsh on for Pat. You all filled a few questions from the showcase around the integration plans for the Siam business or the Siam portion for Auth0 versus Okta. And I think the answer then, assuming probably hasn't changed, was that in order.
You're all familiar with a few questions from the showcase around the integration plans for the business.
Business or the Siam portion for our stereo versus Okta, and I think we answered that in which I'm, assuming probably hasnt changed was that in order to kind of grow the market for both of US best to kind of keep those plans.
Speaker 13: grow the market for both was best to kind of keep those plans kind of shelves for the short term.
Shell so short term I think.
Speaker 13: And I think during your prepared remarks of the slides, you showed kind of a good example of kind of maybe why that strategy makes sense, because you had the Under Armour example win, as well as the Fortune 100. One having the, like, see, Siam product for Opta, and the other for Auth0. So I was wondering if you could kind of dive into maybe those a little bit deeper as to why those customers chose one versus the other, if there was something beyond the product at play dynamic there that people might be able to share. Thanks.
During your prepared remarks in the slides you showed kind of a good example, it's kind of maybe why that strategy makes sense could you add the under armour example win as well, it's a fortune 100.
Each one having the like C. Sam.
<unk> product for opt out the IDEXX for us. So we're the only thing if you could kind of dive into maybe there's a little bit deeper as to why why those customers chose one versus the other if there was something beyond the product that play dynamic there that they might be able to share. Thanks.
Speaker 2: It's an important thing. We've been, even before the acquisition, we thought about it a lot. And we had this thesis that, well, there was some overlap in the product. They were really in two distinct markets. And to build the winning at-scale vendor in the Scion space, we needed to combine the companies. And that was borne out after we got together and started looking at the data. And there's really only about a 300 customer overlap, so about a 2% of the customer base overlap.
It's an important thing we've been even before the the acquisition we thought about a lot and we had this thesis that while there was some overlap in the product they were really in two distinct markets and to build the winning at scale vendor in the science space, we needed to combine the companies and.
That was borne out after we got together and started looking at the data and there's really only about a 300 customer overlaps so about 2% of the customer base overlaps in terms of using.
Speaker 2: in terms of using both platforms.
Using both platforms.
Speaker 2: So it really, our thesis is really born out in the data. As we've got together and the first priority is make sure that we invest in both platforms because they are distinct and make sure we clearly communicate to the customers in the market that both platforms are gonna be maintained and invested in and innovated upon.
So it really our thesis is really borne out in the data as we've got together and the first priority is make sure that we invest in both platforms because they are distinct and make sure. We clearly communicate to the customers in the market that both platforms are going to be maintained and invested in an animated upon.
Speaker 2: That's a really big priority, as you mentioned, that we communicated at showcase.
Really a big priority as you mentioned that were communicated and showcase and then going forward, we want to make sure that.
Speaker 2: And then going forward, we want to make sure that we organize as the sales teams come together and we integrate the sales teams as we talked about. We want to make sure that we make sure that they know how to target accounts and how to best market and communicate and sell the benefits of both respective platforms. So it's something where we've made a ton of progress on and we're getting the enablement ready to go for next year.
We organize as the sales teams come together and integrate the sales teams as we talked about we want to make sure that we are.
Make sure that they know how to target accounts.
How to best market and communicate.
While the benefits of both respect to platforms and so it's something where we've made a ton of progress on and we're getting the enablement ready to go for next year. The most interesting thing about the distinction between the two sided platform does that.
Speaker 2: The most interesting thing about the distinction between the two SCION platforms is that
Speaker 2: the Okta platform is really good if the customer wants to integrate it to existing data sources of customers and they need a cloud directory to sit in front of that and maybe integrate a couple of those accounts to get a couple of those databases together and present a flexible data store for a new customer-facing or an extension of a customer-facing app or website. And that makes sense, right? Because Okta grew out of this workforce use case.
The okta platform is really good if if the customer wants to integrate it to existing data source data sources of customers and they need a cloud directory to sit in front of that and maybe integrate a couple of those accounts to get couple of those databases together and present, a flexible data store for new customer facing.
<unk>.
Or an extension of a customer facing app or website and that makes sense right. Because okta grew out of this workforce use case that was all about taking business applications with their own distinct directories, whether that was on premise active directory or an LDAP directory.
Speaker 2: that was all about taking business applications with their own distinct directories, whether that was on-premise Active Directory or an LDAP directory or a
Speaker 2: an app like Salesforce or Google and presenting that as one unified cloud directory that you could build policy and security around.
Like salesforce or Google and presenting that as one unified cloud directory that you could build policy and security around.
Speaker 2: So in the Under Armour example, that's exactly the case they had. They had an existing directory and an existing e-commerce app that they wanted to add some capability to, and the Okta Universal Directory and the Okta Scion platform helped them do that.
So if you're in the <unk>.
<unk> for example, that's exactly the case they had they had an existing directory and <unk>.
Existing e-commerce App that they wanted to add some capability to the okta Universal Directory and the Okta Siam platform help them do that.
Speaker 2: Another example is where they don't have so much of a directory requirement because maybe a lot of the users on the app or the site self-register or the new app is the directory. That's where Auth0's developer flexibility and extensibility and robust capabilities there really shine. We had the example in the comments about...
Another example is where they don't have so much of a directory requirement because maybe a lot of the users on the app or the site self register or the.
The new App is the directory, that's where often zeros developer flexibility and extensibility and robust capabilities there really.
We really shine we had the example in the call.
Comments about the large financial services customer that was really building a new use case, an officer was perfect for them. So it's borne out and how the market is distinct in how the platforms are complementary.
Speaker 2: the large financial services customer that was.
Speaker 12: really building a new use case and Offsero is perfect for them. So it's borne out in how the market is distinct and how the platforms are complementary to each other.
Great. Thanks, Todd.
Alright, let's go to Adam Borg with Stifel.
Speaker 6: Hey guys, thanks so much for taking the question, just maybe on the headcount for Brett, really strong growth, 76% year on year, just love to hear a little bit more about where you're investing and how should we think about that growth in coming quarters? Absolutely. We're, we're investing across all lines of the business, frankly, when you think about the opportunity out in front of us, massive opportunity, we're
Hey, guys. Thanks, so much for taking the question just maybe on the head count for Brett.
Long growth, 76% year on year, just love to hear a little bit more about where you're investing and how should we think about that growth in coming quarters.
Absolutely we are investing across all lines of the business frankly.
When you think about the opportunity in front of us massive opportunity were.
Speaker 6: you know, $80 billion opportunity. We just guided even next year, 1.755 billion growing 37%, still a rounding error on that opportunity. So we're investing in every line across the business.
$80 billion opportunity, we just guided even next year $175 5 billion growing 37% still a rounding error in that opportunity. So we're investing in every line across the business and I would say it is to your point. It is actually the highest net increase we've ever had as a company and not by like a small amount, but by a very large amount and.
Speaker 6: And I would say it is, to your point, it is actually the highest net increase we've ever had as a company and not by like a small amount, but by a very large amount. And we expect to add a significant amount going into Q4 as we go after this massive opportunity out in front of us. And like I said, it's going to be across all lines of business because there's just a lot to do and a lot to get after.
We expect to add a significant amount going into Q4 as we go after this massive opportunity out in front of us and like I said, it's going to be across all lines of business because theres, just a lot to do and a lot to get after.
Speaker 14: Great, and maybe just a quick follow up to your point about the initial guidance next year and the strength there. So maybe just for Todd or Freddy, of course, Brad, if you'd like to take it too. Maybe just a quick update on the competitive landscape, just given really strong growth in the quarter, and obviously the confidence into next year. Thanks again.
Great and maybe just a quick follow up to your point about the initial guidance next year and the strength. There. So maybe just retired a freddie of course, but if you'd like to take it to maybe.
Maybe just a quick update on the competitive landscape, just given really strong growth in the quarter and obviously the the confidence into next year. Thanks again.
Speaker 3: Yeah, happy to talk about that. The competitive dynamics in the in the business remain remarkably stable. I mean, we watch them very carefully are.
Yeah happy to talk about the competitive dynamics in.
The business remained remarkably stable I mean, we watch them very carefully our win rates continue to be very very strong.
There's two separate pieces to the business customer identity and access management, where the competition is basically build your own right and our job is to help companies think about how they can just take identity off the shelf much more easily and put it inside their websites or their application. The same way you do with twilio for messaging or stripe for payments, although I would argue that.
Speaker 3: And our job is to help companies think about how they can just take identity off the shelf much more easily and put it inside their websites or their applications. The same way you do with Twilio for messaging or Stripe for payments, although I would argue that every application nowadays needs identity. So if we do a good job, it's going to be an even bigger opportunity than some of those others. On the workforce side, the only competitor that we think about and pay attention to continues to be Microsoft. We continue to perform very, very well against them. Every day, the concept of independence, neutrality, and best of breed is what you hear more and more. You don't talk to any CIO or CTO at a large organization who wants to get locked into either the Microsoft stack or even just the Azure platform, both for technology reasons. They want the redundancy into AWS and GCP and otherwise, but also for business reasons. They can put pricing pressure on all of those and they can spread out how they're going to do those workloads. That plays very well into our favor, obviously. We have this great partnership with AWS. We've got a great partnership with GCP. We're the number one provider for Office 365 integrations at scale for the largest organization.
Every application nowadays needs identity. So if we do a good job, it's going to be an even bigger opportunity than some of those others on the workforce side. The only competitor that when you think about and pay attention to continues to be Microsoft we continued to perform very very well against them.
Every day the concept of independents neutrality in best of breed is what you hear more and more you don't talk to any CIO or CTO at a larger organization, who wants to get locked into either the Microsoft stack or even just the azure platform. Both for technology reasons, they want the redundancy into AWS and GTP and otherwise.
But also for business reasons that they can put pricing pressure on all of those and they can spread out how theyre going to do those workloads that plays very well into our favor. Obviously, we have this great partnership with AWS, We got a great partnership with GCT. We're the number one provider for office 365 integrations at scale for the largest organizations in the world and now with <unk>.
Speaker 3: We have this great partnership with AWS. We've got a great partnership with GCP. We're the number one provider for Office 365 integrations at scale for the largest organizations in the world.
Speaker 3: And now at Showcase, we just announced that you can now run actually Auth0 as a private cloud platform on Azure.
Showcase we just announced that you can now run actually at zero as a private cloud platform on Azure. So you really see that we're working very hard to make this the best and easiest solution for all technologies out there and it's gone very well so yeah. When it comes to the competitive landscape. We're paranoid folks we're always paying very close attention, but I'm very happy to say that we haven't seen.
Speaker 3: So you really see that we're working very hard to make this the best and easiest solution for all technologies out there, and it's going very well. So, yeah, when it comes to the competitive landscape, we're paranoid folks. We're always paying very close attention, but I'm very happy to say that we haven't seen any changes and the win rates continue to be very strong in the market. So. Great, thanks again.
Any changes in the win rates continue to be very strong in the market.
Great. Thanks again.
Let's go to Mexico that need them.
Thanks for getting me on guys I think you spoke to it.
Speaker 15: Thanks for getting me on, guys. I think you spoke to it a couple of times on the call here with the conversation around cross-selling or the growing deal size.
The times on the call here with the conversation around cross selling or the growing deal sizes and I am curious can you help give us some flavor for it.
Speaker 15: And I'm curious, can you help give us a flavor for the number of leads or opportunities that are coming to you looking at for the first time on both a workforce and science use case like just.
I guess number of leads or opportunities that are coming to you looking at Asa for the first time on both a workforce in science use case.
Just ball parking pipeline or talked to that qualitatively and then.
Speaker 15: full parking pipeline or talk to that qualitatively and then the...
Speaker 15: The follow-up to that is, I know that the sales force has been doing well executing against this opportunity as you have these two speedboats, if you will. But as customers are coming and looking at you for both these use cases, is there the potential that your sales cycles extend, or how is it you guys are combating that as these deals?
Follow up to that is I know that the sales force that's been doing well executing against this opportunity is you haven't to speed boats. If you will but as customers are coming and looking at you for both of these use cases is there the potential that your sales cycles standard or how is it you guys are combating that S E T.
Deals.
Speaker 3: Yeah, happy to talk about that, Mike. I don't have the lead numbers off the top of my head, so I can't give you a month over month or quarter over quarter compare. I can tell you that the pipeline is very strong. It continues to be very strong. It's growing. And it's growing in the places that it matters. It's growing internationally. International today is 21% of our business. It's going to continue to grow. We're going to continue to invest there. This opportunity is global. It's continuing to grow in important sectors that matter. Federal government, we talked about public sector, financial services, but really technology across the entire landscape. It's continuing to grow across geographies. And frankly, all the businesses are really performing very well right now. The pipeline for Q4 is very strong, but of course, it's the smaller business, smaller mid-market that really generates and closes that pipeline within the quarter. So when you're talking about mid-market, a large enterprise, anything we're closing in Q4 obviously happened a while ago. But I can tell you, looking at next fiscal year, it is very promising. We were just talking with our senior management a couple of days ago about some of the very large opportunities that are starting to come together for the first half of next fiscal year and how we're thinking about that. I mean, people are really starting to think about this as a strategic partnership for their organizations. And we're talking about Fortune 10, Fortune 50, I mean, large, large organizations. And you see, we had another Fortune 50 technology company upsell for workforce just this last quarter. So, I mean, it's really happening.
Yeah happy to talk about that Mike I don't have the the lead numbers off the top of my head. So I can't give you a month over month or quarter over quarter compare I can tell you that the pipeline is very strong and continues to be very strong it's growing and it's growing in the in the places that are matters. It's Glenn we're growing internationally international today 21 person.
Our business is going to continue to grow we need we're going to continue to invest there is this opportunity is global it is continuing to grow in important sectors that matter federal government, we talked about public sector financial services, but really technology across the entire landscape is continuing to grow across geographies.
And frankly all of the businesses are really performing very well right now the pipeline for Q4 is very strong but of course, it's the smaller business smaller mid market that really generates and closes that pipeline within the quarter. So when you were talking about mid market large enterprise anything we're closing in Q4, obviously happened a while ago, but I can tell you looking at next fiscal year.
Here. It is very promising we were just talking with with our senior management a couple of days ago about some of the very large opportunities that are starting to come together for the first half of next fiscal year and how we're thinking about that I mean people are really starting to think about this as a strategic partnership for their organizations and we're talking about fortune 10, Fortune 50, I mean large law.
Organization and you can see we had another fortune 50 technology company upsell for workforce just this last quarter. So I mean, it's really happening.
Speaker 3: to how it's going to go as we have more and more to offer in the bag. Well, hopefully our reps are going to make more and more money by selling more and more software is the short answer. The longer answer is, yeah, obviously, there is more, so they have to learn more. That's on the organization, it's on us, frankly, to do a good job with education, with training, there's more and more sales folks. But I'll tell you what, there's also, we're starting to attract some folks who've been selling enterprise IT for decades.
Do you know how it's going to go as we have more and more to offer in the bag well hopefully our reps are going to make more and more money by selling more and more software is the short answer the longer answer is yeah. Obviously you know there is there is more so they have to learn more that's on the organization. It's on US frankly to do the job with with education.
With training Theres more and more sales folks, but I'll tell you. What there's also we're starting to attract some folks who've been selling enterprise IP for decades, and what that means in large organization that if someone's been managing the Boeing account for IBM or Oracle for last 10 years, they really know their ways around those accounts and they're comfortable now coming to a place like okta.
Speaker 3: And figuring out, wow, I can really set up the next three, five years of going back into that base at Boeing across 24 divisions or across these other organizations and saying, I know how to sell to all those because I know where all the technology is because I helped install it over the last 10 years.
And figuring out Wow I can really set up the next three five years of going back into that base at Boeing across 24 divisions or across these other organizations and saying I know how to sell all of those because I know where all the technology is because I helped install it over the last 10 years. Those are the kinds of opportunities that are exciting now to your point about sales cycles do those elon.
Speaker 3: Those are the kinds of opportunities that are exciting. Now, to your point about sales cycles, do those elongate sales cycles? Sure. If I'm trying to do an ELA at Boeing, it's going to be a little bit longer than a quarter sales cycle. But frankly, like those are the kinds of opportunities that we love to find ourselves in.
Gatesville cycle sure if I'm trying to do in L. A at Boeing is going to be a little bit longer than a quarter sales cycle, but frankly like those are the kinds of opportunities that we love to find ourselves in so when it comes to growing our sales force, it's growing across all segments. Our existing folks are doing very well theres, great new talent, that's joining us.
Speaker 3: So when it comes to growing the sales force, it's growing across all segments. Our existing folks are doing very well. There's great new talent that's joining us.
Speaker 3: both at the sales rep, sales management, and senior leadership levels. So yeah, we're very excited about all that. I'll come back to you on the specific quarter-over-quarter leads number if I can pull it up in time for the end of the call.
Both at the sales Rep sales management and senior leadership levels. So yes, we're very excited about all of that I'll come back to you on the specific quarter over quarter leads number if I can pull it up in time for the end of the call.
Speaker 2: One thing that might be helpful from my perspective is Okta has grown up from the mid-enterprise several years ago to the enterprise over the last few years. We do mega deals, but we don't do a ton of mega deals.
One thing that one thing that might be helpful. From my perspective is okta has grown up from the mid enterprise several years ago to the enterprise over the last few years, we do megadeals, but we don't do a lot of it we don't do a ton of Mega deals and we're getting to the point now where we are going to start doing mega deals. We've done a few and it's already mentioned.
Speaker 2: We're getting to the point now where we are going to start doing mega deals. We've done a few, and as Freddie mentioned,
Speaker 2: as everyone realizes how important identity is in the overall technology strategy of their organization.
Everyone realizes how important identity is in the overall technology strategy their organization and they realize that it has to be independent and neutral and our products are so much better than they were a few years ago. It's these mega deals that are going to start coming more and more and that's that's really exciting.
Speaker 2: and they realize that it has to be independent and neutral, and our products are so much better than they were a few years ago. These mega deals are going to start coming more and more, and that's really exciting.
Speaker 4: Hey, we're getting a little short on time. I want to get to these last three questions. So if you could limit yourself to just a single question each next, we'll go to 7 short to beat the I. G.
Yeah, we're getting a little short on time I want to get to these last three questions. So if you could limit yourself to just a single question. Each next we'll go to Stephen Schwartz of BTG.
Speaker 16: Hey, I'm on for Greg. Thanks for taking my question. I just wanted to ask them fiscal 23 guidance. Are you factoring any material contribution from your payment governance products? Or should we think about anything that happens there as potential upside?
I'm on for Greg. Thanks for taking my question I, just wanted to ask in fiscal 'twenty three guidance.
Factoring any material contribution from your Pam products, where should we think about anything that happens there is potential upside.
Speaker 6: Yeah, I mean, those those products are still in the early innings. So we do expect fast growth out of them. But in terms of the 1.755 billion grown 37%, they will be smaller in nature. And so, yes, we do. We are going to expect something out of them, but I wouldn't put a huge number on it myself. Got it. Thank you.
Yes, I mean those products are still in the early innings. So we do expect fast growth out of them, but in terms of the $1 $75 5 billion growing 37% they will be smaller.
In nature and so yes, we do we are going to expect something on them, but I wouldn't put a huge number on it myself.
Got it thank you.
Speaker 4: And next we'll go to Rudy Cussinger and David.
And next we'll go to Rudy Kissinger at D. A davidson.
Yes, thanks for taking my question.
Speaker 12: Hey, guys. Thanks for taking my question. You know, the acceleration in core octa from 37% in Q1 to 40% this quarter, could you just maybe get a more granular on what the drivers are of that? How much of that is coming, you know, maybe from the cross-cell into the OSIRO base, you know, versus, you know, other factors? Just give a bit more color there. That'd be very...
The acceleration in core okta from 37% in Q1 to 40, 40%. This quarter could you just maybe getting more granular on what the drivers are of that how much of that is coming maybe from the cross sell into the austere base.
Versus other factors just gives a bit more color there that'd be very helpful.
Speaker 3: Yeah, we're very excited about that growth, especially at our scale. Now, you're talking about a $300 million plus business Octa standalone revenue this quarter. When you're growing at 40%, we feel really good about that. Obviously, when you're able to do the type of FCF margin that we are as well, it really puts you in a good position for what's ahead. I think it comes down to a few things. I mean, first of all, as we've said, these trends that we've been tracking on cloud and hybrid IT, digital transformation, zero trust security, I mean, these are long-term trends. And we're in the early innings of it. More and more organizations realize that in the future, identity becomes much more prevalent. The identity is going to become a primary cloud, and they want to do that in the cloud, not on-prem. First of all, full stop.
We're very excited about that growth, especially at our scale now you're talking about a $300 million plus business at the Standalone revenue this quarter when youre growing at 40%, we feel really good about that obviously when you're able to do the type of FCS margin that we are as well it really puts you in a good position for what's ahead I think it comes down to a few things.
First of all.
He said the trends that we've been tracking on cloud and hybrid IP digital transformations, they're trusting and these are long term trends and we're in the early innings of it and more and more organizations realize at the future in the future identity becomes much more prevalent the identity is going to become a primary cloud and they want to do that in the cloud not on Prem first of all.
Stop second of all I think you would see that as the platform expands more and more products, we're able to land and expand with so many net new situations and use cases, you can now end with just MSA for customer data and access management, if you're a private wealth management shop trying to protect your customers you can land with just workflows, if youre doing a new science.
The web site and you want to bring in your own data for registration you can land with Jess <unk> SSL and core products, if you're a small business getting up and running so youre seeing a lot of that when it comes to the Asa Euro cross sell and upsell.
I think you certainly see some really good examples of that but I would say first of all it's pretty early its still just two quarters into everyone's getting to know each other and second of all when we think about the opportunity out there look I'm very excited about 14000 total customers I'm very excited about adding 950 quarter over quarter, but let's be clear the opportunity is hundreds and hundreds of <unk>.
Speaker 6: I'm very excited about 14,000 total customers. I'm very excited about adding 950 quarter over quarter. But let's be clear, the opportunity is hundreds and hundreds of thousands of accounts out there, both public sector, private sector, around the world, every industry, every size of company. And so, yeah, we're very happy with the results, but the opportunity is ahead and you're just starting to see people start to say to themselves, this is important, this is foundational, I need a modern partner, and it's playing right into our favor. All right. Finally, we'll finish up with Taz from Guggenheim. Hi, Steve. Hey, guys, thanks for using me. And I have a question on billings momentum. So you had a strong revenue growth quarter, but the billings look like it's gone a bit versus last quarter. Anything to call out there? Was there any kind of headwind from timing, duration, makeshift towards more monthly customers? It looks like a bit of a slowdown versus last quarter, given the strong revenue growth. Yeah, thanks, Taz, I'll take that. Yes, you're exactly right on that. Invoice timing. If you remember last year, we had a tailwind in Q3 of FY21 due to invoice timing that flips into a headwind in Q3 of FY22. And so you're seeing that effect.
Thousands of accounts out there both public sector or private sector around the world every industry every size company and so yeah, we're very happy with the results, but the opportunities ahead, and you're just starting to see people start to say to themselves. This is important this is foundational I need a modern partner and its playing right into our favor.
Alright, finally finish up a tad from Guggenheim.
Speaker 4: All right, finally, we'll finish up with Tass and Guggenheim.
Speaker 17: I said, Hey guys, thanks for using me and other question on Billings momentum. So you had a strong revenue growth order.
Hey, guys. Thanks squeezing me in I have a question on billings momentum. So you had a strong revenue growth quarter, but.
Speaker 17: But the buildings look like it's gone a bit versus last quarter. Anything to call out there? Was there any kind of headwind from timing, duration, makeshift towards more monthly customers? It looks like a bit of a slowdown versus last quarter given.
But it does look like it's going on a bit versus last quarter anything to call out there or was there any kind of headwind from timing duration mix shift towards more of a monthly customer it looks like a bit of a slowdown versus last quarter given the strong revenue growth. Yes, thanks, guys I'll take that.
Speaker 6: The strong revenue growth. Yeah, thanks guys. I'll take that. Yes, you're exactly right on that invoice timing. If you remember last year, we had a tailwind in Q3 of FY21 due to invoice timing.
Yes, youre exactly right on that invoice timing if you remember last year, we had a T.
Tailwind in Q3 of FY 'twenty, one due to invoice timing.
Speaker 6: that flips into a headwind in Q3 of FY22. And so you're seeing that effect, unfortunately. And this is why we've been talking with you guys more and more about CRPO, because it removes that invoicing timing issue. And like you just said, in other situations, in terms of buildings duration, we didn't have any buildings duration issues, to be clear. But, you know, those are the problems with buildings and will continue to be problems forever. And that's the reason why we like CRPO growth. You can see strong CRPO growth for.
Flipped into a headwind in Q3 of FY 'twenty, two and so youre seeing that affect unfortunately, and this is why we've been talking with you guys more and more of that <unk>, because it removes that invoicing timing issue.
You just said in other situations in terms of billings duration, we didn't have any billings duration issues to be clear, but those are the problems of billings and we will continue to be problems forever and invest the reason why we like <unk> growth you can see strong CPO growth for for the quarter of 57% year over year and elevated expectations for the full fiscal year 'twenty two.
Speaker 6: for the quarter, 57% year-over-year, and elevated expectations for the full fiscal year 22 with the raise that we talked about earlier in the call. So thanks for the question.
With the raise that we talked about earlier in the call. So thanks for the question frankly, I just wonder if I can squeeze it in last quarter can you give us some metrics on.
Speaker 17: Thanks for just one one more thing, last quarter, can you give us some metrics on.
Speaker 17: R0 ACV growth of 63 percent. Any more, any color you can provide on R0 growth this quarter, ACV growth, REV growth, or anything to
Although ECP growth was just 50% anymore any color you can provide on an agile growth this quarter ECP growth Rev growth or anything to get a better sense of how are you.
Speaker 6: You get a better sense of how your performance was in the quarter. What I can say that is, Azure is performing very well and very well on their way for achieving a $200 million greater than $200 million error goal by the end of the fiscal year so they're doing very well very pleased with the attraction we're getting there and it just.
What once was in the quarter, what I can say to that is a zero is.
Performing very well and very well on their way for achieving our $200 million greater than $200 million.
Our goal by the end of the fiscal year, So theyre doing very well very pleased with the traction we're getting there.
Every every day it gets a little bit better with the integration coming together.
Speaker 6: Every day it gets a little better with the integration coming together. And we're very excited about the opportunity as a combined company going forward.
Very excited about the opportunity as a combined company going forward.
Thanks, Rick.
Speaker 4: Right. Thanks, guys. That was a great conversation. Before you go, I just want to let you know that we'll be attending the Needham Growth Conference on January 11th. We'll also be participating in several bus tours in both December and January . So we hope to see you again at one of those events. So that's it for today's meeting. If you have any follow up questions, you can email us at investor at Okta dot com. Thanks. Thanks, everyone. Thank you.
Alright, Thanks, guys that was a brief conversation.
I just want to let you know that we'll be attending the Needham growth conference on January 11th will also be participating in several bus tours in both December and January So we hope to see you again at one of those events. So that's it for today's meeting if you have any follow up questions you can email us at investor at <unk> Dot com. Thanks, Thanks, Ed.
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